LOS ANGELES RTI
International Metals Inc.s effort to account for its
growing involvement in complexand costlydownstream
energy projects has forced the company to postpone filing its
final second-quarter financial results.
RTI reported its
preliminary second-quarter results late last month (
amm.com, July 31) and said then it would report
its final results in its Form 10-Q quarterly filing with the
U.S. Securities and Exchange Commission. However, this past
week it said it had notified the SEC that it "will be delayed
in filing" this document with the agency.
titanium producer, distributor and fabricator said that an
accounting review had concluded it needed a "different revenue
recognition model" for certain energy projects.
The method previously
used by RTI recognized revenue and cost of sales on the
projects "upon completion of individual components of the
projects," RTI said. But an accounting review determined that,
"due to the evolving nature" of its energy business, a portion
of RTIs energy market projects should use the
RTI vice chairwoman,
president and chief executive officer Dawne S. Hickton said
during a recent quarterly conference call that the company has
been extending its energy offerings beyond its "historic"
market of steel and titanium deepwater riser system components
to "highly engineered and complex systems and subsystems."
Hickton noted that
these projects have a "much higher revenue stream than
previously available, but they also have a much higher
development cost structure, significant learning curves as well
as RTI direct contributions to development."
One of the earlier
examples of the more-complex projects was oil spill recovery
work performed for BP Plc in the Gulf of Mexico in 2010,
Hickton said. Moreover, RTI said it is in the final stages of a
"very complex system used in deepwater drilling" due to be
completed before the end of the year, making the accounting
review all the more relevant.
Hickton said in a
statement this past week that RTI was confident that any
accounting change would have no impact on either total contract
revenues or income on the affected projects. About 20 past and
current contracts are under review.
The energy market
represents less than 10 percent of consolidated net sales, RTI
said. However, the market has received increased attention from
investors and security analysts when RTIs dominant
commercial and military aerospace markets turn downward.
accounted for 55 percent of RTIs business last year,
while defense represented 23 percent and medical, energy and
other markets 22 percent, according to the companys Form
10-K filing with the SEC.